Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Forward-Looking Statements

In this report, in other filings with the SEC and in press releases and other
public statements by our officers throughout the year, Epiq Systems, Inc. makes
or will make statements that plan for or anticipate the future. These
forward-looking statements include, but are not limited to any projection or
expectation of earnings, revenue or other financial items; the plans, strategies
and objectives of management for future operations; factors that may affect our
operating results; new products or services; the demand for our products and
services; our ability to consummate acquisitions and successfully integrate them
into our operations; future capital expenditures; effects of current or future
economic conditions or performance; industry trends and other matters that do
not relate strictly to historical facts or statements of assumptions underlying
any of the foregoing. These forward-looking statements are based on our current
expectations. In this Quarterly Report on Form 10-Q, we make statements that
plan for or anticipate the future. Many of these statements are found in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this report.

Forward-looking statements may be identified by words or phrases such as
"believe," "expect," "anticipate," "should," "planned," "may," "estimated,"
"goal," "objective," "seeks," and "potential" and variations of these words and
similar expressions or negatives of these words. Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), provide a "safe harbor" for forward-looking
statements. Because forward-looking statements involve future risks and
uncertainties, listed below are a variety of factors that could cause actual
results and experience to differ materially from the anticipated results or
other expectations expressed in our forward-looking statements. These factors
include (1) any material changes in our total number of client engagements and
the volume associated with each engagement, (2) any material changes in our
clients' deposit portfolio or the services required or selected by our clients
in engagements, (3) material changes in the number of bankruptcy filings, class
action filings or mass tort actions each year, or changes in government
legislation or court rules affecting these filings, (4) overall strength and
stability of general economic conditions, both in the United States and in the
global markets, (5) failure to keep pace with technological changes and
significant changes in the competitive environment, (6) risks associated with
the handling of confidential data and compliance with information privacy laws,
(7) changes in or the effects of pricing structures and arrangements, (8) risks
associated with the integration of acquisitions into our existing business
operations, (9) risks associated with indebtedness, (10) risks associated with
foreign currency fluctuations, (11) risks associated with developing and
providing software and internet-based technology solutions to our clients, (12)
risks associated with cyber-attacks, interruptions or delays in services at data
centers, (13) risks of errors or failures of software or services, (14) risks
associated with our international operations, (15) risks of litigation against
us or failure to protect our intellectual property, (16) any material non-cash
write-downs based on impairment of our goodwill, and (17) other risks detailed
from time to time in our SEC filings, including our most recent Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. In
addition, there may be other factors not included in our SEC filings that may
cause actual results to differ materially from any forward-looking statements.
We undertake no obligation to update publicly or revise any forward-looking
statements contained herein to reflect future events or developments, except as
required by law.

This discussion and analysis should be read in conjunction with the Condensed
Consolidated Financial Statements and the accompanying Notes to the Condensed
Consolidated Financial Statements included in this Quarterly Report on
Form 10-Q.

Overview

Epiq is a leading global provider of integrated technology solutions for the
legal profession. We combine proprietary software, deep subject matter
expertise, highly responsive customer service delivery and a global
infrastructure to assist our customers with the technology requirements for
their most important and complex matters. We offer these capabilities across a
variety of practice areas including bankruptcy, litigation, class action,
antitrust, investigations and regulatory compliance.

Investing in proprietary software development maximizes our competitiveness in
the marketplace and distinguishes us from our competitors. Beyond our
proprietary software we also incorporate various licensed third-party software
products in our solution set allowing us to expand our solutions.

Because we deliver most of our software in a hosted environment and because of
the high volume of client data that we manage, network infrastructure is an
essential component of our technology strategy. A single large client engagement
may entail over 100 million documents or 100 terabytes of information and may
include complex structured data (i.e., databases) and unstructured data (e.g.,
email archives). We operate eDiscovery data centers in the United States,
Canada, United Kingdom, Hong Kong, Shanghai and Japan that provide reliable,
secure access to our software environments and to customer databases.
Information security is of paramount importance in any managed technology
business, and Epiq incorporates best practices designed to protect sensitive
customer data.

Our software and IT capabilities include significant in-house fulfillment
capabilities. Our office locations in New York, Kansas City and Portland have
internal abilities for high-speed printing and mailing, call center operations,
and disbursement and tax records preparation. The combination of software, IT
and fulfillment resources enables Epiq to act as a single-source solution for
even the largest, most complex matters in the markets where we compete.

We work in niche, specialty areas which require deep subject matter expertise -
such as litigation, bankruptcy, M&A, mass tort, investigations and class action
-which have distinctive practices and requirements. Technology alone is
insufficient to bring about a successful outcome on a sophisticated client
matter; it is often the application of the technology and the expertise of our
staff that create the most value for our client. We have a worldwide team of
executives, client services specialists and technical consultants on whom
clients rely for expert advice - whether delivered at the client's site or from
one of our office locations. Our team includes former practicing litigators,
bankruptcy attorneys, plaintiff's counsel, defense counsel, eDiscovery counsel
and other professionals who are leaders in their areas of expertise. While we do
not offer clients legal advice (because we are not a law firm), we draw heavily
from our subject matter expertise in the legal profession to assist clients in
achieving the best outcome on each project on which we are retained.

Our clients include top tier law firms, the in-house legal departments of major
corporations, trustees, specialty fiduciaries and other professionals. Among
corporate clients, we have substantial relationships with large, multinational
companies in a variety of industries, including financial services,
pharmaceuticals, insurance, technology and others. Among law firms, we work
extensively with Am Law 100 firms in the U.S., Magic Circle firms in the U.K.
and leading boutique or specialty law firms in all geographies. The global
nature of our business continues to grow. With full-service offices (i.e.,
locations having a data center, on-site technical staff, on-site project
management capabilities and local consulting capacities) around the world, Epiq
offers a geographic reach to support client relationships wherever we are
needed.

Our financial results are primarily driven by the following facts, among others:

† the number, size and complexity of customer engagements attained;
† the number of documents or volume of data we processed, hosted or
reviewed;
† the number of hours professional services are provided;
† the deposit-based fees we earn are dependent upon the balance of
assets placed with our designated financial institutions by bankruptcy trustees;
and

† the geographic locations of our clients or locations where services
are rendered.

Our financial results for first quarter 2014 reflect the impact of strategic
investments directed at the global expansion of the eDiscovery franchise as well
as a continued higher mix of eDiscovery document review services compared to the
prior year period which have a lower margin than the company's overall margin
which impacted income from operations.

During 2013 and the first three months of 2014, we are continuing to expand our
eDiscovery services internationally. We added eDiscovery offices and data
centers in Tokyo, Shanghai and Toronto in 2013. Document review services and
international growth were the primary contributors to Technology segment
operating revenue growth in the first quarter of 2014 as compared to the same
period in 2013, with growth occurring in both electronically stored information
("ESI") and document review services. Global ESI solutions continued as the
primary service offering, representing approximately 55% of the total 2014 first
quarter Technology segment operating revenue, while global document review
services increased during the year to now represent approximately 45% of the
total 2014 first quarter Technology segment operating revenue.

Lower bankruptcy filings due to the current cyclical downturn in bankruptcy
cases, in general, and lower trustee deposit balances specifically related to
our Chapter 7 services, resulted in decreases in operating revenues related to
our bankruptcy service

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offerings. Our bankruptcy services continue to maintain market leadership
during this period of declining bankruptcy filings. We expect the current
cyclical downturn in bankruptcy filings to continue throughout 2014.

Operating revenues related to our settlement administration services for the
quarter ended March 31, 2014 decreased as compared to the prior year period due
to activity related to a large private anti-trust settlement administration
engagement in the prior year period.

Results of Operations for the Three Months Ended March 31, 2014 Compared with
the Three Months Ended March 31, 2013

The discussion that follows provides information which we believe is relevant to
an understanding of our consolidated results of operations. Also see our
discussion of segment results in the "Results of Operations by Segment" section
below.

The increase in operating revenue for the three months ended March 31, 2014 as
compared to the same period in the prior year was driven by a $26.4 million
increase in the Technology segment, offset by a $13.1 million decrease in
operating revenues for the Bankruptcy and Settlement Administration segment.

Total revenue includes reimbursed expenses, such as postage related to
notification services. We reflect these reimbursed expenses as a separate line
item on our accompanying Condensed Consolidated Statements of Income. Although
reimbursable expenses may fluctuate significantly from quarter to quarter, these
fluctuations have a minimal effect on our quarter to quarter income from
operations as we realize little or no margin from this revenue.

Operating Expense

The $5.1 million increase in direct cost of operating revenue, exclusive of
depreciation and amortization, was primarily the result of the increase in and
the mix of operating revenue and includes a $15.5 million increase in direct
compensation-related costs primarily in support of the continued revenue growth
in our Technology segment. This increase was partially offset by an $8.8
million decrease in costs for legal notification and advertising services as
compared to the three months ended March 31, 2013, which included costs related
to a large private anti-trust settlement engagement.

The decline in reimbursed direct costs for the three months ended March 31, 2014
as compared to the same period of 2013 corresponds to the decline in revenue
from reimbursed expenses.

Selling, general and administrative expenses increased $11.8 million and
included an increase of $6.1 million in compensation-related expense which
includes $2.6 million in post-employment benefits related to an executive
resignation agreement and a $2.0 million increase in share-based compensation
expense. The increase in selling, general and administrative expenses also
includes an increase of $1.5 million in outside professional services, an
increase of $2.1 million in office-related expenses such as lease expense,
maintenance, utilities and supplies and an increase of $0.7 million in travel
related expense.

Depreciation and software and leasehold amortization costs increased $1.7
million as a result of increased depreciation on equipment and software related
to segment investments.

Amortization of intangible assets decreased $1.8 million related to certain of
our intangible assets being amortized on an accelerated amortization method
which are at lower amortization stages of the estimated useful lives of the
intangible assets.

Operating expenses for the three months ended March 31, 2014, included a fair
value adjustment to contingent consideration of $1.1 million related to our
acquisition of De Novo in 2011. No fair value adjustment to contingent
consideration is included in operating expenses for the three months ended
March 31, 2013. See Note 3 to the Condensed Consolidated Financial Statements
for further discussion of the contingent consideration.

Interest Expense, Net

The increase in net interest expense was primarily due an increased principal
amount of debt outstanding during the first quarter 2014 as compared to the
prior year period and also due to the higher rate of interest for our term loan
under the Credit Agreement as compared to the interest rate under the prior
credit agreement. Interest expense for the three months ended March 31, 2014
also includes $0.8 million related to fees incurred in conjunction with the
amendment to our Credit Agreement. See Note 3 to the Condensed Consolidated
Financial Statements for further discussion of the Credit Agreement.

Income Taxes

Our effective tax rate for the three months ended March 31, 2014 was 29.2%
compared to 25.9% for the comparable prior year period. The reduced 2013 rate
reflected a discrete benefit related to the enactment of the 2012 American
Taxpayer Relief Act which extended the federal research credit for both 2013 and
2012. We recognized approximately $0.4 million of tax benefit relating to the
2012 credits and a portion of our 2013 tax credits during the first quarter of
2013. While legislation has been introduced to retroactively reinstate the
credit to the beginning of 2014, the federal research credit has not yet been
extended past 2013 and our 2014 effective tax rate does not reflect any research
credit benefit. Our effective tax rate is lower than the U.S. statutory rate
because we earned income in international jurisdictions with lower tax rates and
our income from

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these jurisdictions increased during the three months ended March 31, 2014 as
compared to the three months ended March 31, 2013.

On March 31, 2014, New York State passed comprehensive corporate income tax
reform with most changes effective for years 2015 and beyond. We have
substantial business presence within the state, but we do not expect the new law
to have a material impact on our overall expected future tax expense. Because a
change in tax law is accounted for in the period of enactment, our results for
the three months ended March 31, 2014 reflect the impact of this state law
change, however, the impact was not material.

Results of Operations by Segment

The following segment discussion is presented on a basis consistent with our
segment disclosure contained in Note 6 of our Notes to Condensed Consolidated
Financial Statements. The table below presents operating revenue, direct and
administrative costs (including reimbursed costs) and segment performance
measure for each of our reportable segments and a reconciliation of the segment
performance measure to consolidated income before income taxes.

Operating revenue increased $26.4 million during the three months ended
March 31, 2014 as compared to the prior year period primarily as a result of an
increase in eDiscovery engagements as compared to the first quarter of 2013, and
was solely related to organic growth. We expect to continue to grow our global
leadership position throughout the remainder of 2014. Our eDiscovery businesses
in Europe and Asia showed continued combined growth with a 40% increase in
operating revenue over the prior year first quarter.

Direct, selling, general and administrative costs increased primarily in support
of revenue growth and included a $15.0 million increase in direct
compensation-related expenses primarily in support of our eDiscovery document
review services, a $2.2 million increase in information technology-related
costs, a $0.9 million increase in other production costs and a $1.5 million
increase in office related expenses related to the expansion of our document
review centers capacity.

The Technology segment's financial results for the three months ended March 31,
2014 reflect the impact of strategic investments primarily in support of global
expansion and revenue growth of the eDiscovery franchise as well as a higher mix
of eDiscovery document review services compared to the prior year which have
lower operating margins than the Company's overall margin.

Bankruptcy and Settlement Administration Segment

Operating revenue decreased $13.1 million as compared to the prior year,
primarily due to a large private anti-trust engagement in the prior year period
which was principally completed in the first quarter of 2013 that increased
legal notification and advertising services for that period. Also impacting the
first quarter of 2014 was the continued current cyclical downturn in bankruptcy
filings. We expect the current cyclical downturn in bankruptcy filings to
continue through the remainder of 2014. Settlement administration continues to
be dependent on the timing and size of contracts awarded.

Direct, selling, general and administrative costs decreased $24.9 million
primarily related to a $11.0 million decrease in direct cost of services and a
$13.4 million decrease in reimbursed direct costs both which are related to the
large private anti-trust engagement which was active during the first quarter of
2013.

Liquidity and Capital Resources

Cash flows from operating activities

During the three months ended March 31, 2014, our operating activities used net
cash of $0.8 million. Included in net cash used by operating activities was a
net loss of $2.3 million which included $17.5 million of non-cash expenses for a
total contribution to cash flows of $15.2 million related to net income adjusted
to exclude non-cash expenses. Cash used by operating activities also included a
$16.0 million net use of cash resulting from changes in operating assets and
liabilities, primarily from an $11.2 million decrease in accounts payable and
other liabilities, a decrease in income taxes payable of $3.8 million and an
increase of $1.8 million in prepaid expenses and other assets. These uses of
cash were partially offset by a $3.1 million decrease in trade accounts
receivable. Trade accounts receivable will fluctuate from period to period
depending on the period to period change in revenue and the timing of revenue
and collections. Accounts payable will fluctuate from period to period depending
on the timing of purchases and payments.

During the three months ended March 31, 2013, our operating activities used net
cash of $5.3 million. Included in net cash used by operating activities was net
income of $3.9 million including non-cash expenses of $14.8 million, for a total
contribution to cash flows of $18.7 million related to net income adjusted to
exclude non-cash expenses. Cash used by operating activities also included a
$24.0 million net use of cash resulting from changes in operating assets and
liabilities, primarily from a $15.1 million increase in trade accounts
receivable due to revenue growth and also included the use of cash for customer
deposits primarily related to the fourth quarter 2012 receipt of a $14.3 million
customer deposit for a large settlement administration engagement and the first
quarter 2013 expenditures for that matter. These uses of cash were offset by a
$6.4 million increase in accounts payable and other liabilities.